SME growth and entrepreneurial abilities: A Penrosian approach to the New Zealand seafood industry

Abstract

Sustainability of fisheries, both at a macro level and at the level of individual businesses, is of huge significance economically and socially to many countries. New Zealand has the world’s sixth largest fisheries exclusive economic zone (EEZ) and 10th largest coastline, yet many of its seafood businesses struggle to create, deliver and capture value. Indeed, many struggle to survive. The industry is characterised by plant closures, job losses, low returns and, according to Stringer et al. (2011), increasingly the offshoring of value-adding processing and the export of related capabilities, to China. According to Penrose (1959), firms use a combination of external and internal resources to grow, but growth is limited essentially by the capabilities of management, and whether entrepreneurial managers see opportunities for growth arising from other possible uses of resources. This approach has been built on by Teece in recent years (e.g. Teece, 2007; 2009). A Penrose-Teece (P-T) framework derived from these studies informs this research, and encompasses the individual, firm and industry levels of analysis. This framework is applied SMEs in the New Zealand seafood industry, asking: 1) How do seafood SMEs create, deliver and capture value through their activities? 2) What are the key capabilities that distinguish innovative, value adding/capturing businesses from those which are not? 3) How do entrepreneurial management capabilities influence value-adding activities in seafood SMEs? The findings are empirically derived from seventeen SME cases, each with a spread of value chain activities, drawn from the two main fisheries industry sectors – wild capture and aquaculture. In total 24 primary and 16 follow-up semi-structured interviews were carried out between 2010 and 2012. Interviews were complemented with field notes and on-site observations, and secondary data from websites, news media, magazine articles, documentaries, photographs, company reports and financial accounts. The findings show that the wild capture and aquaculture SME cases essentially followed one of two distinct paths; either a) a production-led path utilising a commodity-oriented complex of capabilities, often resulting in a struggle between diminishing returns and increasing costs; or b), a market-responsive entrepreneurial path, utilising a complex of entrepreneurial management capabilities, resulting in the capturing of high-levels of margin by market shaping and creating entrepreneurs. From these two paths an integrated framework is developed to show how additional value can potentially be created, delivered and captured in the industry sectors; using dynamic capabilities to shape the environment and coevolve with markets. The research thus provides theoretical, empirical and practical contributions.